It is not the capital of the banks that matters much it is the rate of risky
assets. the higher the risky assets, the higher should be the capitalization
of the banks. and because risk could be covered up and marketed as triple a for
a while it will be a while before we find out the exact risk of the present
crisis. Prof. ito would compare this with the Japanese crisis and the time it
took to write off bad debt was about nine years. but he also mentions in his
ongoing work that this case is different, which might make matters more complex
to say the least.
as a point of departure from neoclassical theory, Marx's view of a dichotomy
between finance and the real economy stands out and i paraphrase 'for the
financier production does not exist.' it is this tendency for the financial
system to expand at will further compounds the departure from values and the
acquisition of surplus by predation.
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